What are the Basics of Cargo Insurance? [All Coverage Discussed]


Freight carriers have the legal obligation to cover basic insurance, the so-called “carrier liability.” This insurance is limited and covers only 10 cents per pound of your shipment and only under particular circumstances like natural disasters or vehicle accidents. Therefore, carrier liability doesn’t cover the full value of your load. 

Adequate insurance is critical since freight shippings are getting more often damaged than smaller shipments. Ask your carrier in detail about all information on their coverage, deductibles, and claims management in your case. Based on this information, you can decide whether you need additional insurance and which one to choose.

This article will guide you through the basics of cargo insurances to give you all the knowledge you need to protect your goods from theft, damage of getting lost in transit. 

Cargo Insurances and Its Benefits

Cargo insurances protect you from financial losses when your shipment gets damaged or lost, and it covers precisely the kind of damages you’re insured for.

Adequate cargo insurance covers your shipment during the whole duration of its journey. You can protect it from many external factors and, therefore, yourself by minimizing financial risks in case of loss or damage. The right insurance doesn’t just give you security but also a piece of mind. Protecting your income from unforeseeable circumstances and disruptions is highly beneficial for your business because it guarantees a stable profit.

What Types of Cargo Insurances Exist?

There are different variations of Cargo Insurances out there, which come with diverse limits and amounts of money they cover. To which extend your shipment is covered can vary enormously and is always dependent on the details of the insurance policy you choose. You should read policies in detail and don’t forget the fine print before picking and insurance.

Land Cargo Insurance

If you ship your cargo over land, this insurance covers your shipment and protects it against theft, damage from a collision, and similar risks. It’s important to know that usually, these insurances only cover shipping within the United States. 

Marine Cargo Insurance

This international insurance covers sea or air freight for the overseas part of the journey. It protects your shipping from lousy weather, piracy, (un)loading damages, and similar. Whether you ship one time or regularly, you can choose between renewable and permanent insurance, which we discuss under the following headline.

Open Coverage

This coverage is insuring your freight for a specific period, typically one year. This one policy includes multiple shipments, which can be very useful when you ship frequently.

  • Renewable: You have to renew this policy after a shipment or period.
  • Permanent: This policy covers unlimited shipments in a set time frame.

Single Coverage

If your shipment is not shipping frequently and you just need cargo insurance from time to time, a single coverage is the go-to. This specific coverage policy is just covering freight on a per shipment basis.

All Risk Coverage

All Risk Coverage is the broadest coverage you will be able to find, applying to losses and physical damages from external causes, with exceptions: Cargo insurances usually don’t cover negligence. Items affected by temperature changes are typically excluded too. Other exclusions could be cargo abandonment, war, loss of use, failure to pay, strikes, riots, civil commotions, pollution, earthquakes, and similar. 

Free of Particular Average (FPA)

This policy covers only damages or losses caused by the same perils named in the policy. That’s why it’s also known as Named Perils Policy. Theft is usually not covered by FPA but usually includes burning, sinking, train derailment, truck overturning, stranding, and collision.

General Average

This insurance only covers some parts of your shipment loss, and it the essential requirement for sea freight. All owners of cargo onboard a ship must contribute to losses if some cargo gets lost or damaged. This means you also pay for the coverage of other shippers.

Warehouse to Warehouse

This insurance covers your shipment from being unloaded from a vessel all way to the customer’s warehouse. 

What does Cargo Insurance Not Cover?

The cargo insurance doesn’t cover damages caused by the shipper. This includes damages caused by inadequate packaging and damage due to flawed products. Products made from hazardous materials, some electronic products, and other specific kinds of freight, which are highly valuable or fragile, might also not be covered by some insurance providers. Some providers might exclude particular modes of transportation.

During the Shipping Process

When your freight gets delivered, you should inspect it with your driver and note any visible losses or damages. Unpack and check your shipment as soon as possible and contact your freight carrier and insurance company if you can detect hidden damages and losses. 

When you make a claim, these are the details of your shipment that you should have in hand. 

  • The inventory number as stated in the inventory list by your insurance provider
  • The item’s room, where it was packed before the shipping
  • Item description including all the details you remember, including the age of the item and the date of purchase
  • Description of the damage 
  • Original costs and the replacement costs
  • Amount of your claim: either costs of repairing in case of damage or the item’s price in case of loss.

You should act immediately and file the damages, preferably within 24 hours. Carrier liability and ass freight insurance usually just cover the damage or loss of the goods, but not the lost time, the labor, or the shipping costs – Check in with your carrier and insurance company about these details.

We wish you good luck with your shipment!

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